hree senior executives at Citigroup were forced to resign yesterday as
Charles O. Prince, the firm's chief executive, delivered on a promise to
improve the bank's sullied reputation in the aftermath of its private
banking operations being shut down in Japan last month.
The three who resigned are Deryck C. Maughan, the chairman of
Citigroup's extensive international operations; Thomas W. Jones, the head
of the bank's asset management division; and Peter Scaturro, the chief
executive of private banking. All were members of the firm's management
committee and their departures represent the most significant exodus of
top executives since Mr. Prince succeeded Sanford I. Weill as chief
executive a little more than a year ago.
The dismissals were announced in an internal e-mail message sent to
Citigroup employees yesterday evening. The message stated that the asset
management and private banking units of the bank would report immediately
to Robert B. Willumstad, president and chief operating officer of
Citigroup.
Last month, Citigroup was forced to close its private banking
operations in Japan after regulators found that a lack of internal
controls enabled certain employees to engage in fraudulent
transactions.
Mr. Prince and the bank, already facing the prospect of suits from Enron creditors and charges of irregular bond
trades in Britain, then hired Eugene Ludwig, a former comptroller of the
currency at the United States Treasury, to conduct an internal review of
the matter.
According to a person briefed on the review, its conclusion was that
Mr. Jones, Mr. Scaturro and Mr. Maughan should be held responsible for
lack of oversight in Japan. Mr. Jones, Mr. Scaturro and Mr. Maughan could
not be reached for comment late yesterday.
Mr. Scaturro reported to Mr. Jones, and the two executives had broad
responsibility for the bank's private banking operations in Japan. The
departure of Mr. Maughan, whose responsibility for the Japan operations
was less direct, underscores the depth to which Mr. Prince is willing to
burrow into Citigroup's executive suite in his drive to enforce a culture
of accountability at the sprawling financial institution.
Mr. Maughan's departure could be seen as all the more embarrassing
because he styled himself as a Japan expert of sorts. He is a trustee of
the Japan Society in New York and worked in Japan as a fast-rising
executive at Salomon Brothers in the 1980's. Until recently, he was
responsible for all of Citigroup's business in Japan. He was also recently
knighted.
Mr. Maughan's stature at the bank derived in large part from his close
relationship with Mr. Weill, who remains chairman. Mr. Maughan has
frequently socialized with Mr. Weill and is a trustee with him at Carnegie
Hall.
And, though the dismissals bore the stamp of Mr. Prince, a lawyer who
for years worked alongside Mr. Weill as to build Citigroup into a
financial colossus, they were completed with the full knowledge of the
board and Mr. Weill, a person close to the board said yesterday.
In recent months, Mr. Prince has become increasingly frustrated with
the seeming drumbeat of ethical and regulatory lapses at Citigroup. On a
recent conference call with analysts he said that such behavior would be
dealt with in the near future.
"I just want to make it very clear to all of you that for all of us,
examples like that are simply not acceptable," he said, referring to the
sanctions in Japan, while adding that action had been taken and that there
would be "more to come."
Mr. Jones's corporate roots also date back to Salomon Brothers, where
he was the head of the investment bank's asset management unit.
Although the closing of the bank's private banking operations in Japan
will barely dent the bank's net profits, which were $17 billion last year,
the ignominy of the world's largest financial institution having its
private bankers expelled from such an important market, together with the
other regulatory lapses, has cast a pall over the bank and its stock
price. Citigroup's stock has been a weak performer during Mr. Prince's
reign and the resulting low valuation has made all the harder for the bank
to make the acquisitions that were Mr. Weill's trademark and that analysts
say are necessary to keep the bank growing at an acceptable pace. Shares
of Citigroup fell 63 cents, to $43.59 yesterday.
Last month, Mr. Prince shook up his management team by appointing
Sallie L. Krawcheck, a former securities industry analyst, as chief
financial officer and moving Todd S. Thomson to assume her job as head of
research and retail brokerage. Mr. Thomson will now have oversight of the
private banking unit, the memorandum said yesterday. Mr. Prince has said
that Mr. Thomson and Ms. Krawcheck are strong candidates to succeed him as
chief executive.
